Economics Assignment PDF

# Practice Questions 1. 'Food security and the Green Revolution' Write any four arguments in favour of the Green Revolution. 2. Discuss the Green Revolution and its consequences 3. Do you think import substitution can protect domestic industries? Give your views. 4. Explain 'growth with equity' as...

# Practice Questions 1. 'Food security and the Green Revolution' Write any four arguments in favour of the Green Revolution. 2. Discuss the Green Revolution and its consequences 3. Do you think import substitution can protect domestic industries? Give your views. 4. Explain 'growth with equity' as a planning objective. 5. Explain the need for and types of land reforms implemented in the agriculture sector. 6. Five-year plans play a commanding role in the economic development of India. Mention the objectives and achievements of India's five-year plans. 7. India started five-year plans as a strategy of development in 1950. Since then, we have completed 11 five-year plans. Draw a time line for our five-year plans. 8. List out some arguments in favour of and against the Green Revolution. 9. Modernisation means the adoption of new technology and a change in the social outlook of the people, which is one of the most important objectives of Indian planning. What are the other objectives? 10. Prepare an essay on the 'Goals of Five-Year Plans' pursued until 1991. 11. Self-reliance was an important goal of the five-year plan in India. Give reasons 12. The Green Revolution brought about self-sufficiency in food grain production. Do you agree? 13. The Green Revolution caused the degradation of soil due to heavy doses of chemical fertilisers and pesticides. Substantiate. 14. The Green Revolution enabled India to achieve self-sufficiency in food grains. How far is this statement true? Substantiate your answer. 15. The Green Revolution enabled India to achieve self-sufficiency in food grains. Substantiate your answer. 16. The spread of green revolution technology enabled India to achieve self-sufficiency in food grains." In light of the above statement, explain the advantages of the green revolution. 17. The stagnation in Indian agriculture during colonial rule was permanently broken by the Green Revolution. Comment on the statement. 18. What are miracle seeds, and how did they impact agriculture? 19. What are the common objectives of five-year plans? Do you think that we achieved these objectives with our five decades of planning? 20. What is a marketable surplus in agriculture? 21. What is a plan, and why did India opt for planning? 22. Why was it necessary for a developing country like India to follow self-reliance as a planning objective? ## 3. Economic Reforms Since 1991 ### Liberalisation, Privatisation and Globalisation The origin of the financial crisis can be traced to the inefficient management of the Indian economy in the 1980s. Expenditure is more than income; the government borrows to finance the deficit from banks and also from people within the country and from international financial institutions. The government was spending a large share of its income on areas such as the social sector and defence, which do not provide immediate returns. The income from public sector undertakings was also not very high to meet the growing expenditure. Foreign exchange, borrowed from other countries and international financial institutions, was spent on meeting consumption needs. In the late 1980s, government expenditure began to exceed its revenue by large margins. No country or international funder was willing to lend to India. India approached the International Bank for Reconstruction and Development (IBRD), popularly known as the World Bank and the International Monetary Fund (IMF), and received $7 billion as a loan to manage the crisis. (The International Bank for Reconstruction and Development (IBRD) and International Monetary Fund (IMF) were established by delegates at the Bretton Woods Conference in 1944 and became operational in 1946.) There were two components to the New Economic Policy (NEP): the stabilisation measures and the structural reform measures. Stabilisation measures are short-term measures, intended to correct some of the weaknesses in the balance of payments and to bring inflation under control. Structural reform policies are long-term measures aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy. ### Liberalisation Liberalisation was introduced to put an end to the restrictions and open various sectors of the economy. Sectors that received greater attention in and after 1991 are the industrial sector, financial sector, tax reforms, foreign exchange markets, trade, and investment. ### Deregulation of Industrial Sector In India, regulatory mechanisms were enforced in various ways: (I) industrial licensing; (II) the private sector was not allowed in many industries; (III) some goods could be produced only in small-scale industries; and (IV) controls on price fixation and distribution of selected industrial products. The reform policies introduced in and after 1991 removed so many restrictions. Industrial licensing was abolished for almost all products. (Except for alcohol, cigarettes, hazardous chemicals, etc.), the only industries that are now reserved for the public sector are defence equipment, atomic energy generation, and railway transport. Many goods produced by small-scale industries have now gone unreserved. In many industries, the market has been allowed to determine the prices. ### Financial Sector Reforms The financial sector includes financial institutions, such as commercial banks, investment banks, stock exchange operations, and foreign exchange markets. The Reserve Bank of India (RBI) oversees the regulation of the financial industry in India. One of the major aims of financial sector reforms is to reduce the role of the RBI from regulator to facilitator of the financial sector. The reform policies led to the establishment of private sector banks, both Indian and foreign. Foreign institutional investors (FII), such as merchant bankers, mutual funds, and pension funds, are now allowed to invest in Indian financial markets. The foreign investment limit in banks was raised to around 50 percent. Those banks that fulfil certain conditions have been given the freedom to set up new branches without the approval of the RBI. ### Tax Reforms Tax reforms are concerned with the reforms in the government's taxation and public expenditure policies, which are collectively known as fiscal policy. There are two types of taxes: direct and indirect. Direct taxes consist of taxes on the incomes of individuals as well as the profits of business enterprises. Indirect taxes are taxes levied on commodities. The rate of corporation tax, which was very high earlier, has been gradually reduced. Recently, the Parliament passed a law, the Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax system in India. This law came into effect in July 2017. GST is expected to generate additional revenue for the government, reduce tax evasion, and create 'one nation, one tax, and one market.' ### Goods and Service Tax (GST) Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from July 1, 2017, on the supply of goods and services, right from the manufacturer or service provider to the consumer. It is applicable throughout the country with one rate for one type of goods or service. It has amalgamated a large number of central and state taxes and cesses. It has replaced a large number of taxes on goods and services levied on the production, sale, or provision of services. It has replaced various types of taxes/cesses, levied by the central and state/UT governments. Some of the major taxes that were levied by the Centre were Central Excise Duty, Service Tax, Central Sales Tax, Cesses, Taxes on Advertisements, Taxes on Lottery, Betting, Gambling, State Cesses on Goods, etc. These have been subsumed in GST. Five petroleum products have been kept out of GST for the time being, but with the passage of time, they will become subject to GST. State governments will continue to levy VAT on alcoholic liquor for human consumption. Tobacco and tobacco products will attract both GST and Central Excise Duty. Under GST, there are six (six) standard rates applied, i.e., 0%, 5%, 12%, 18%, and 28%, on the supply of all goods and/or services across the country. ### Salient Features of GST 1. One Nation, One Tax: The Central and State Governments imposed the Goods and Services Tax (GST), which replaced a number of indirect taxes, such as value-added tax (VAT), excise duty, and service tax. It brought uniformity to India's tax system and removed the cascading effect of taxes. 2. Dual Structure: The Central Government's (CGST) and the State Governments' (SGST) levies are the two different taxation regimes that make up the GST. 3. Destination-based Tax: Every transaction in the supply chain, from the producer to the final consumer, is subject to the destination-based tax known as GST. 4. Input Tax Credit (ITC): Businesses can claim a credit for the taxes they have paid on inputs used in the production or provision of goods and services under the GST by using the input tax credit. This helps avoid double taxation in addition to reducing the overall tax liability. 5. Except alcohol, all goods sold for human consumption would be come under GST. 6. Increased Compliance and Transparency: Through the expansion of the formal economy, GST seeks to improve tax compliance. The electronic records and digitisation of processes within the tax system contribute to the transparency of the system and reduce instances of tax evasion. ### Foreign Exchange Reforms The first important reform in the external sector was made in the foreign exchange market. In 1991, as an immediate measure to resolve the balance of payments crisis, the rupee was devalued (a decrease in the value of home currency in the international market due to deliberate action taken by the government) against foreign currencies. It also set the tone to free the determination of rupee value in the foreign exchange market from government control. It led to an increase in the inflow of foreign exchange. Now, more often than not, markets determine exchange rates based on the demand and supply of foreign exchange. ### Trade and Investment Policy Reforms: The liberalisation of trade and investment policy was initiated to increase the international competitiveness of industrial production as well as foreign investments and technology in the economy. The aim was also to promote the efficiency of local industries and the adoption of modern technologies. In order to protect domestic industries, India was following a regime of quantitative restrictions on imports. The trade policy reforms aimed at (i) the dismantling of quantitative restrictions on imports and exports; (ii) the reduction of tariff rates; and (iii) the removal of licensing procedures for imports. Import licensing was abolished except in the case of hazardous and environmentally sensitive industries. Quantitative restrictions on imports of manufactured consumer goods and agricultural products were also fully removed in April 2001. Export duties have been removed to increase the competitive position of Indian goods in international markets. ### Privatisation It implies the shedding of ownership or management of a government-owned enterprise. Government companies are converted into private companies in two ways: (i) by the withdrawal of the government from ownership and management of public sector companies; and (ii) by the outright sale of public sector companies. Privatisation of public-sector enterprises by selling off part of the equity of PSEs to the public is known as disinvestment. Some examples of public enterprises with Maharatnas, Navratnas, and Miniratnas status are: 1. Maharatnas: - Indian Oil Corporation Limited - Steel Authority of India Limited 2. Navratnas: - Hindustan Aeronautics Limited - Mahanagar Telephone Nigam Limited 3. Miniratnas: - Bharat Sanchar Nigam Limited - Airport Authority of India - Indian Railway Catering and Tourism Corporation Limited. ### Globalisation Globalisation generally refers to the integration of the economy of a country with the world economy. It involves the creation of networks and activities that eliminate economic, social, and geographical boundaries. ### Outsourcing Outsourcing is one of the important outcomes of the globalisation process. In outsourcing, a company hires regular services from external sources. As a form of economic activity, outsourcing has widely expanded. Many of the services, such as voice-based business processes (popularly known as BPO or call centres), record keeping, accounting, banking services, music recording, film editing, book transcription, clinical advice, etc., are outsourced by companies in developed countries to India. The low wage rates and availability of skilled workforce in India have made it a destination for global outsourcing in the post-reform period. ### World Trade Organisation (WTO) The WTO was founded in 1995 as the successor organization to the General Agreement on Trade and Tariff (GATT). GATT was established in 1948. The WTO is expected to establish a rule-based trading regime in which nations cannot place arbitrary restrictions on trade. The purpose of the WTO is to increase production and trade of services, ensure optimum utilisation of world resources, and protect the environment. The WTO agreements cover trade in goods as well as services to facilitate international trade (bilateral and multilateral) through the removal of tariffs as well as non-tariff barriers between member countries. As an important member of the WTO, India has been at the forefront of framing fair global rules and regulations and advocating for the interests of the developing world. ### Indian Economy During Reforms: An Assessment In economics, the growth of an economy is measured by the gross domestic product (GDP). In the post-1991 period, India witnessed rapid growth in GDP on a continuous basis for decades. During the reform period, the growth of agriculture has declined. While the industrial sector was in fluctuation, the growth of the service sector has improved. The opening of the economy has led to a rapid increase in foreign direct investment and foreign exchange reserves. The foreign investment includes foreign direct investment (FDI) and foreign institutional investment (FII). India became successful in exporting auto parts, engineering goods, IT software, and textiles during the reform period. Rising prices have also been kept under control. ### Reforms in various sectors The reform process has been widely criticised because it does not fully address the areas of employment, agriculture, industry, infrastructure development, and fiscal management. ### Growth and Employment: Though the GDP growth rate has increased during the reform period, scholars point out that the reform-led growth has not generated sufficient employment opportunities in the country. ### Reforms in Agriculture: Reforms do not benefit agriculture. Public investment in the agriculture sector, especially in infrastructure, has fallen during the reform period. The removal of fertiliser subsidies has led to an increase in the cost of production, which has severely affected small and marginal farmers. Export-orientated policy strategies in agriculture lead to focussing on cash crops. This leads to an increase in the price of food grains. ### Reforms in Industry: Industrial growth has also recorded a slowdown. This is because of decreasing demand for industrial products due to cheaper imports, inadequate investment in infrastructure, etc. The infrastructure facilities, including power supply, have remained inadequate due to a lack of investment. Developing countries like India still do not have access to developed countries' markets because of high non-tariff barriers. ### Disinvestment Policy: Every year, the government fixes a target for disinvestment in public sector enterprises. Critics point out that the assets of public-sector enterprises have been undervalued and sold to the private sector. Disinvestment is used to offset the shortage of government revenues rather than develop social infrastructure. ### Reforms and Fiscal Policies: The tax reductions in the reform period were aimed at yielding larger revenue and curbing tax evasion, but they did not achieve a fruitful result. Reform policies involving tariff reduction have curtailed the scope for raising revenue through customs duties. ### What were the objectives of NEP 1991? ### Critically evaluate the impact of globalisation on the agricultural and industrial sectors in India. ### Critically evaluate the impact of the New Economic Policy of 1991.